Student loans

Are the coalition being a little unfair in the way they uprate student loans?

After all, George Osborne made a big play of how it was right to adjust all benefits by the Consumer Price Index rather than the Retail Price Index. Read more

Put aside the talk of a rise in student fees. The most important hint given by David Willetts today is that soft student loans, subsidised by the state, will have to be reformed. He’s raising the axe over a indirect giveaway to the middle-classes worth around £1.2bn a year.

Willetts is, understandably, still skirting around the issue. But the declaration of intent to bring down the cost to the taxpayer is clear:

“What I want is something that does indeed reduce the burden on the taxpayer but it also has to strengthen the finances of universities in the long term, some of which are in a very fragile state because of the mess that Labour left behind,” he said.

Just consider what would happen if student fees were raised without tackling the student loans. Without stopping the perk, the state could end up spending even more on higher education, not less, in order to subsidise bigger loans. For Willetts to meet his goal of easing the burden on the taxpayer, the interest rates on loans must rise.

At the moment the government offers terms that are beyond generous. Read more